Working Papers and Chapters and Reporter Articles

In this paper, we survey theoretical models of the effect of the minimum wage and, in somewhat greater detail, evidence of its effect on employment and unemployment. Our discussion of the theory emphasizes recent work using two-sector and heterogeneous-worker models. We then summarize and evaluate the large literature on employment and unemployment effects of the minimum on teenagers. Finally, we survey the evidence of the effect of the minimum wage on adult employment, and on employment in low-wage industries and areas.

While previous time series studies have quite consistently found that the minimum wage reduces teenage employment, the extent of this reduction is much less certain. Moreover, because few previous studies report results of more than one specification, the causes of differences in estimated impacts are not well understood. Less consensus is evident on the effect of the minimum wage on teenage unemployment, or its relative impact on black and white teenagers. The purpose of this paper is both to update earlier work and to analyze the sensitivity of estimated minimum wage effects to alternative specification choices. In addition to providing estimates of the effect of minimum wage increases on aggregate employment and unemployment rates of teenagers, we explore several related issues: the rel...